Correlation Between Citigroup and Guangzhou KDT

Can any of the company-specific risk be diversified away by investing in both Citigroup and Guangzhou KDT at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Guangzhou KDT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Guangzhou KDT Machinery, you can compare the effects of market volatilities on Citigroup and Guangzhou KDT and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Guangzhou KDT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Guangzhou KDT.

Diversification Opportunities for Citigroup and Guangzhou KDT

-0.08

Correlation Coefficient

Citigroup  Guangzhou KDT

Good diversification

The 3 months correlation between Citigroup and Guangzhou is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guangzhou KDT Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KDT Machinery and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Guangzhou KDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KDT Machinery has no effect on the direction of Citigroup i.e., Citigroup and Guangzhou KDT go up and down completely randomly.

Pair Corralation between Citigroup and Guangzhou KDT

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.78 times more return on investment than Guangzhou KDT. However, Citigroup is 1.28 times less risky than Guangzhou KDT. It trades about 0.24 of its potential returns per unit of risk. Guangzhou KDT Machinery is currently generating about 0.02 per unit of risk. If you would invest  6,360  in Citigroup on October 27, 2024 and sell it today you would earn a total of  1,788  from holding Citigroup or generate 28.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Citigroup  vs.  Guangzhou KDT Machinery

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou KDT Machinery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou KDT Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guangzhou KDT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Guangzhou KDT

The main advantage of trading using opposite Citigroup and Guangzhou KDT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Guangzhou KDT can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Guangzhou KDT will offset losses from the drop in Guangzhou KDT's long position.

The idea behind Citigroup and Guangzhou KDT Machinery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.